Müller Milk & Ingredients has promised to “add value, quality and innovation” into the fresh milk fixture after sealing a long-term strategic partnership with Tesco.
The processor and Tesco announced the new partnership on 29 January, following weeks of speculation over the future of Tesco’s milk supply. It means Müller has been elevated to the same supplier relationship status Tesco has with the likes of AMT, Hilton Food Group, G’s and Branston in other grocery categories.
With the two parties working more closely together, some industry sources have questioned the implications of the arrangement on the wider dairy sector.
Arla has reportedly seen its share of Tesco fresh milk business falling by a quarter as a result of the partnership, and some have suggested Müller will now look to leverage its newly won influence by displacing existing Tesco own-label suppliers in yoghurt and even butter, having taken its first tentative steps into the retail butter category last year.
Sources have also suggested the partnership could lead to more NPD and supply chain initiatives from Tesco and Müller, prompting competitors to innovate more at farmgate and ramp up welfare and sustainability claims, as Waitrose demonstrated this week.
“Müller has clearly thrown a lot of money at Tesco to secure this relationship,” an industry source told The Grocer. “This could herald fierce competition between the two big processors as Arla looks to find new markets for its milk.”
Announcing the launch of the partnership, Tesco commercial director for fresh food Matt Simister said the retailer had a “proud history” of supporting dairy farmers. “This agreement will create the most sustainable, progressive and customer-focused partnership in the industry,” he claimed.
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